* Ended Q1 with 18.6 mln subscribers, down 400,000
* Q1 revenue $605.5 mln vs Street view $646.5 mln
* Raises 2009 operating income view
* Shares fall 18 percent (Recasts; adds results details, analyst comment, byline; updates stock activity)
By Franklin Paul
NEW YORK, May 7 Sirius XM Radio Inc (SIRI.O) lost more subscribers to its satellite radio service than expected in the first quarter due to weak car sales, overshadowing a rosy outlook driven by cost cuts and sending its shares sharply lower.
The company, which borrowed $530 million from Liberty Media Corp LINTA.O LCAPA.O LMDIA.O earlier this year to stave off looming debt problems, said subscribers to the pay-radio service declined by some 400,000, or about 2 percent, ending the period at 18.6 million.
"They (shareholders) were disappointed in the sub number," said RBC Capital Markets analyst David Bank, who had expected a subscriber decline of about 69,000 in the period.
Sirius shares tumbled 19 percent to 42.5 cents a share on Nasdaq on Thursday afternoon.
Sirius, which gains most of its new subscribers from radios built into cars, attributed the majority of the decline to poor automotive sales. For similar reasons, it expects to see a "noticeable hit" to its subscribers in the second quarter.
Net loss attributable to common shareholders was $236.6 million, compared with $104.1 million a year earlier. Its loss per share was flat at 7 cents, as its outstanding shares more than doubled from a year earlier. Excluding costs related to preferred shares, the loss was 1 cent a share.
Analysts had expected a loss of 3 cents per share, according to Reuters Estimates.
Pro forma sales rose 5 percent to $605.5 million, but fell short of analysts' view of $646.5 million. The pro forma figures reflect the fact that Sirius completed its purchase of rival XM Satellite Radio last July and compare the results as if they were a single company a year ago, also making some accounting adjustments for the transaction.
"Revenue missed on a surprising decline in subscribers -- we thought they would still be net-adding subscribers," said Miller Tabak & Co analyst David Joyce. "I think the subscriber loss is going to offset the cost-cutting."
Chief executive Mel Karmazin acknowledged the tough sales outlook for the auto industry, where Chrysler LLC has already filed for bankruptcy protection and plans to halt some of its production and General Motors Corp (GM.N) plans to close more than 2,600 North American dealerships.
But on a conference call with analysts, he touted Sirius' efforts to move toward profitability, including a 23 percent reduction in operating costs and an extension of its contract with GM through 2020, with "very improved economics for us."
"Sirius XM is a cash flow growth story. We posted our second consecutive quarter of positive adjusted EBITDA and this will continue," he said, referring to earnings before interest, taxes, depreciation and amortization -- a widely used measure of profitability for media companies.
As a results of accelerated cost cutting, Sirius expects to exceed $350 million in adjusted income from operations this year, up from its previous forecast of $300 million.
Janco Partner analyst Murray Arenson noted Sirius is trying to shape how it is perceived, after more than two years under a cloud of uncertainty due to the merger and the possibility of missing critical loan payments.
In February, Liberty Media, controlled by cable pioneer John Malone, agreed to lend $530 million to Sirius in exchange for a 40 percent equity stake, saving the debt-laden satellite radio provider from possible bankruptcy.
"Given where they are coming from, which is the precipice of bankruptcy, they are a stronger company," Arenson said. "The question now becomes what makes them more valuable. The idea of emphasizing the cash flow stream to make them more valuable going forward seems like a reasonable way to go." (Reporting by Franklin Paul and Anupreeta Das; Editing by Derek Caney and Gerald E. McCormick)